Merchants Bancorp’s MBINM: A Steady 8.25% Dividend in a Rising Rate World

Income investors seeking reliable payouts in today’s volatile markets face a conundrum: how to balance yield, safety, and resilience to rising rates. Enter Merchants Bancorp’s Series D Preferred Stock (MBINM), offering a compelling blend of 8.13% dividend yield and robust financial underpinnings. Despite its reputation for volatility in certain sectors, MBINM has demonstrated remarkable dividend consistency since 2023—no cuts, only increases—positioning it as a standout income play for conservative portfolios.

Dividend Sustainability: Growth Amid a Rising Rate Environment

The $0.5156 quarterly dividend (equivalent to an 8.25% annualized coupon) has been unwavering. Since 2023, Merchants Bancorp has increased its preferred dividend twice, from $0.07 to $0.08 in 2024 and then to $0.10 per depositary share in early 2025, as shown in the table below. This trajectory reflects strong earnings support, with a 6.8% dividend payout ratio (dividend per share relative to earnings) that leaves ample room for future hikes.

Critics may question the non-cumulative structure of MBINM, which means unpaid dividends are not owed. However, Merchants’ financial strength—$18.8 billion in assets, a top performer in the S&P 1500 Financial Sector Index, and a AA- credit rating—underpins its ability to sustain payouts. The company’s dividend growth aligns with its common stock policy, where an 11% boost in April 2025 signaled confidence in its earnings trajectory.

Financial Resilience: A Beacon in a Challenging Landscape

Merchants Bancorp’s three core segments—Multi-Family Mortgage Banking, Mortgage Warehousing, and Banking— collectively drive stability. Its asset quality remains robust, with a non-performing loan ratio of just 0.3% as of March 2025. This, combined with a $25.36 share price trading at a 5.6% premium to its $25 liquidation value, signals market optimism about its ability to weather economic shifts.

The perpetual nature of MBINM adds another layer of appeal. Unlike fixed-term preferred stocks, holders benefit from unlimited dividend payments, provided the issuer remains solvent. While the coupon rate resets to Five-Year Treasury +4.34% post-2027, the current 8.25% yield is locked in until then—a critical feature in a rising rate environment where many income instruments face downward pressure.

Risk-Reward: Balancing Premiums and Resets

No investment is without risks. MBINM’s non-cumulative structure means missed payments are possible, though none have occurred in its history. Additionally, the reset mechanism post-2027 introduces uncertainty: if rates decline, the yield could drop. However, in a sustained high-rate environment—a likely scenario given the Fed’s cautious stance—the reset could elevate payouts further, making MBINM a hedge against inflation.

The premium to liquidation value ($1.40 above $25) reflects investor demand but also suggests limited upside for capital appreciation. For income-focused investors, this is a minor trade-off. Compare MBINM’s 8.13% yield to the broader preferred stock market’s 4.5% average yield—a stark contrast underscoring its value proposition.

Conclusion: A Conservative Investor’s High-Yield Anchor

In an era where income generation is paramount, MBINM stands out. Its consistent dividend growth, premium pricing, and issuer strength make it a rare gem for portfolios needing stability and yield. While risks exist, they are mitigated by Merchants’ financial fortress and the reset feature’s long-term upside potential.

For conservative investors prioritizing income over growth, MBINM is a must-consider. With its 8.25% coupon locked in until 2027 and a company poised to navigate rising rates, now is the time to act.

Final Call: MBINM offers a rare combination of high yield, dividend resilience, and issuer credibility—a compelling case for income investors to take a position before the reset mechanism shifts the calculus.

Disclosure: This analysis is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.